Investor & Analyst Morning 20 October 2016

Transcription

1 Investor & Analyst Morning 20 October 2016

2 Olivier Brousse Chief Executive Officer 1 1

3 Decentralised origination Derek Potts Group Managing Director Primary Investment 2 2

4 Primary Investment Overview Platform through which John Laing secures investments in greenfield infrastructure Originates and identifies opportunities Assembles / joins consortia Management of bid process to achieve preferred bidder or exclusive status Financial close Key attributes Decentralised international network Sector expertise plus technical, financial, commercial skills Strong relationships with government bodies, vendors, contractors, operators and lenders Strong credentials 3

5 International Network/ Decentralised Origination Network of regional and specialist teams collaborating to originate and execute deals across a wide range of infrastructure sectors Transport: Rail (including rolling stock), roads, street lighting and highways maintenance Environmental: Renewable energy (including wind power, solar power and biomass), water treatment and waste management TO LN AM LA NY SY Social infrastructure: Healthcare, education, justice, public sector accommodation and social housing John Laing office ML AU 4

6 Our Sector Strength 120+ investment commitments in PPP and renewable energy to date New sectors under consideration: broadband, offshore wind, water 5 5

7 Strong international partners 6

8 Consortia for existing projects Project Equity investors Contractor(s) (or turbine manufacturer) Operator Sydney Light Rail (Australia) John Laing First State Acciona Acciona Transdev Manchester Waste TPSCO (UK) John Laing Viridor Ineos Chlor Keppel Seghers Ineos Chlor Nordergründe Wind Farm (Germany) John Laing wpd Gothaer Leben Senvion wpd New Generation Rolling Stock (Australia) John Laing Bombardier Itochu Aberdeen Bombardier Laing O Rourke Bombardier 7

9 Shortlisted PPP projects North America George Massey Bridge Geordie Howe International Bridge LAX People Mover Central 70 road Europe National Broadband, RoI Asia Pacific Grafton Prison NSW NZ Schools III Plus one PPP bid not yet disclosable 8

10 Strong and well diversified pipeline PPP 30 June 2016 PPP 31 December 2015 North America 34% UK 9% Asia Pacific 33% North America 37% UK 10% Asia Pacific 31% 1,337m Rest of Europe 24% 1,135m Rest of Europe 22% Renewable Energy 30 June 2016 Renewable Energy 31 December 2015 UK 14% Asia Pacific 10% North America 13% UK 6% Asia Pacific 14% North America 15% 441m 359m Rest of Europe 61% 359m Rest of Europe 67% 9

11 Centralised Investment Committee Chris Waples Group Managing Director Asset Management Chairman Investment Committee 10 10

12 Investment Committee centralised process Terms of reference Delegated authority from the Board To review primary bidding and investing activities in relation to all proposed investments To be independent of the bidding process To ensure risk profiles of investments are acceptable and that financial returns are adequate Investments outside IC terms of reference also require Board approval 11 11

13 Investment Committee centralised process Terms of reference Membership Delegated authority from the Board To review primary bidding and investing activities in relation to all proposed investments To be independent of the bidding process To ensure risk profiles of investments are acceptable and that financial returns are adequate Group Managing Director, Asset Management (Chairman) Group Chief Executive Group Finance Director Group Managing Director, Primary Investment Group General Counsel & Company Secretary Other senior managers (with some rotation) Investments outside IC terms of reference also require Board approval 12 12

14 Investment Committee flexible approach Objective is to make consistent and high quality decisions Investment awareness Proactive bid teams Detailed knowledge How we operate IC meets as frequently as required Membership experienced in all major infrastructure sectors Draws on internal specialists and experience New investment types and countries Third party advice taken when required Special meetings set up to consider new sectors 13

15 Investment Committee flexible approach Objective is to make consistent and high quality decisions New investment types Third party advice taken when required Special meetings set up to consider new sectors Speyside Biomass, UK 14

16 Investment Committee what we look at Consortium partners Financial parameters, including size of commitment and sensitivity analysis Risks Potential value enhancements / other opportunities Key terms of project finance Supply chain Timetable Contractor security package Key terms of shareholder agreements Competition Sector and geography Comparison vs other similar investments Impact on portfolio 15 15

17 Key financial parameters Financial parameter Hold to maturity IRR Secondary market discount rates Money multiple Annualised rate of return Payback Cash yield profile Description Hold-to-maturity internal rate of return on the basis that the investment is held until the end of the underlying project life Estimated discount rate range within which the project would be valued in the secondary market once it becomes operational Realisation proceeds plus any distributions divided by equity funds injected Money multiple divided by term over which investment held expressed as a percentage Number of years over which equity funds injected are recovered from future distributions Cash yield forecast from the investment once the underlying project is operational 16 16

18 Coffee 17 17

19 Value creation Chris Waples Group Managing Director Asset Management 18 18

20 9 Valuation methodology Valuation of the Group s investment portfolio carried out at 30 June and 31 December plus a review at 31 March and 30 September Discounted cash flow methodology based on receipt of cash flows until asset maturity Base case discount rate for operational project Derived from secondary market information and other data points Adjusted for project specific risks Premia added to reflect construction risk Construction risk premia reduce over time Opinion on valuation at 30 June and 31 December from an independent third party 19

21 0 Valuation methodology PPP assets Illustrative example Value uplift on FC IRR 10%-12% 9.25% Initial Construction Period D Construction Period C Final Construction Period B Operations A 8.25% 7.25% Applicable DR Time 20% 60% 20% 20

22 1 Valuation methodology Renewable energy assets Illustrative example Value uplift on FC IRR 10%-12% 9%-10% Construction Period Ramp Up Period Operations C B A 8%-9% Applicable DR Time x months 12 months 21

23 Equity value PPP investment 22 22

24 Text book example of a great investment Forth Valley Royal Hospital 23 23

25 Value enhancement Forth Valley Royal Hospital Money multiple Divested 2012 Money multiple - assuming FC cash flows and divestment discount rate 2x 1.5x Value enhancements - Major maintenance savings - Insurance savings - SPV savings - Model optimisation Invested x 24

26 Fair value movement Components Six months ended 30 June 2016 ( m) Six months ended 30 June 2015 ( m) Unwinding of discounting Reduction of construction risk premia Foreign exchange movements 49.4 (21.0) Change in operational benchmark discount rates Change in power and gas price forecasts (16.3) (7.3) Value enhancements and other changes Fair value movement Embedded value is released as cashflows draw closer and assets move through construction phase 25

27 Intercity Express Programme Case Study Mark Westbrook Managing Director Primary Investments: UK, Ireland, N.Europe

28 Value Creation Cycle Innovative Solution Potential Upsides Robust Financing Solution Value Creation for client and John Laing Ability to De-risk Future Flexibility Governance 27

29 Value Creation Development Phase Innovative Solution Potential Upsides Robust Financing Solution Value Creation for client and John Laing Ability to De-risk Future Flexibility Governance 28

30 Value Creation Development Phase Potential Upsides Innovative Solution Robust Financing Solution 2012: Project Grand Prix Intercity Express Programme 2012 Best Transport Project Award Value Creation for client and John Laing Intercity Express Programme 2012: Best Pathfinder Project Award Ability to De-risk Future Flexibility Intercity Express Programme 2012: European PPP Deal of the Year Governance Intercity Express Programme 2012: European Rolling Stock Deal of the Year Intercity Express Programme 2014: Rail Deal of the Year Intercity Express Programme 29

31 Value Creation Development Phase Innovative Solution 5 car Bi-Mode (GW) Potential Upsides Robust Financing Solution 9 car Electric (GW) Value Creation for client and John Laing 9 car Bi-Mode(EC) 5 car Electric (EC) Ability to De-risk Future Flexibility 5 car Bi-Mode (EC) Governance 9 car Electric (EC) 30

32 Value Creation Delivery Phase Innovative Solution Potential Upsides Value Creation Robust Financing Solution Agility Trains West (Board) Agility Trains East (Board) for client and John Laing Ability to De-risk Future Flexibility Chief Executive Officer Governance Implementation Director Transition & Operations Director Commercial Director Finance Director Fleet Manager Transition & Operations Manager (GWML) Transition & Operations Manager (ECML) Finance Manager (GWML) Fleet Engineer Contract Performance Analyst Contract Performance Analyst Finance Manager (ECML) Accounts Assistant 31

33 Value Creation Delivery Phase Innovative Solution Potential Upsides Ability to De-risk Value Creation for client and John Laing Robust Financing Solution Future Flexibility Governance Design Manufacture Test Final Acceptance Operations 32

34 Value Creation Delivery Phase Innovative Solution Potential Further Efficiencies Robust Financing Solution Value Creation for client and John Laing Ability to De-risk Future Flexibility Governance 33

35 Illustrative impact of macro-economic factors Patrick Bourke - Group Finance Director 34 34

36 Liabilities Assets Illustration of impact of change in portfolio value discount rates Summary balance sheet 30 June 2016 ( m) 0.25% increase in portfolio value discount rate 0.25% decrease in portfolio value discount rate Portfolio value (30.2) 31.6 Cash collateral Non-portfolio assets 0.5 Total investments 1,090.9 Other long term assets 5.0 Cash 32.6 Total Assets 1,128.5 Working capital and provisions (21.2) Cash borrowings (100.0) Pension deficit (IAS 19) (35.9) Other retirement benefit obligations (7.7) Total Liabilities (164.8) Portfolio value is sensitive to the discount rate Weighted average discount rate at 30 June 2016 was 9.1% Recent movements in secondary market rates have been c25-30 basis points 0.25% change has an impact of +/- 30m Net Assets (30.2)

37 Liabilities Assets Illustration of impact of change in IAS 19 pension discount rates Summary balance sheet 30 June 2016 ( m) Portfolio value Cash collateral Non-portfolio assets % increase in pension discount rate 0.25% decrease in pension discount rate Present value of pension fund liabilities based on discount rate derived from high quality corporate bonds yields Total investments 1,090.9 Other long term assets 5.0 Cash 32.6 Total Assets 1,128.5 Discount rate at 30 June 2016 was 2.85% Working capital and provisions (21.2) Cash borrowings (100.0) Sensitivity to 0.25% change is illustrated all other things being equal Pension deficit (IAS 19) (35.9) 39.8 (45.1) Other retirement benefit obligations (7.7) Total Liabilities (164.8) Net Assets (45.1) Sensitivity does not take account of hedging or change in value of pension fund assets 36

38 Liabilities Assets Illustration of impact of change in foreign exchange rates Summary balance sheet 30 June 2016 ( m) 5% strengthening of currency vs Sterling 5% weakening of currency vs Sterling Portfolio value (25.0) Cash collateral (3.1) Non-portfolio assets 0.5 Total investments 1,090.9 Other long term assets 5.0 Cash 32.6 Total Assets 1,128.5 Working capital and provisions (21.2) Cash borrowings (100.0) Pension deficit (IAS 19) (35.9) 9.0 (9.0) Other retirement benefit obligations (7.7) Total Liabilities (164.8) Net Assets (37.1) At 30 June 2016, 54% of the portfolio was denominated in overseas currencies 5% movement of each relevant currency against Sterling would decrease or increase the value of overseas investments by c 25m Cash collateral at 30 June 2016 included AU$92.4m and US$24.5m Pension fund assets at 30 June 2016 include 202.5m in overseas equities Movements would be partly offset by hedges 37

39 Liabilities Assets Illustration of impact of change in inflation rates Summary balance sheet 30 June 2016 ( m) 0.25% increase in inflation 0.25% decrease in inflation Portfolio value (13.0) Cash collateral Non-portfolio assets 0.5 Total investments 1,090.9 Other long term assets 5.0 Cash 32.6 Total Assets 1,128.5 Based on a sample of PPP investments, the Group estimates a 0.25% increase in inflation would result in a valuation uplift of c 14m for the PPP investments in the portfolio at 30 June % decrease in inflation would result in a valuation reduction of c 13m Inflation changes in one jurisdiction do not mean the same change in all jurisdictions in which the Group invests Working capital and provisions (21.2) Cash borrowings (100.0) Pension deficit (IAS 19) (35.9) (32.8) 30.3 Other retirement benefit obligations (7.7) Total Liabilities (164.8) Impact on renewable energy projects depends on whether energy prices react to changes in inflation Changes in inflation also impact the pension fund liabilities and consequently the pension deficit (all other things being equal) Net Assets (18.8) 17.3 Pension fund sensitivity does not take account of hedging or change in value of pension fund assets 38

40 Other macro-economic factors Corporation tax rates Changes in corporation tax rates impact the value of investments Impact depends on specific tax rates in each jurisdiction in which we invest Recent reduction from 18% to 17% in the future UK tax rate increased portfolio value by 1.7m at 30 June 2016 Deposit rates Under project finance arrangements, projects in which we invest tend to hold significant cash balances Changes in deposit rates affect value of investments Reductions in long-term deposit rate forecasts in several jurisdictions led to a 6m reduction in the portfolio value at 30 June 2016 Power prices Against the overall portfolio valuation at 30 June 2016, we estimate that a +/- 5% movement in power price forecasts would have an impact of approximately +/- 0.7% of total portfolio value 39

41 Q&A 40 40

42 Conclusion 41 41

43 Lunch 42 42